Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Beauty and Bribery - Two Words I Would Not Expect To Use Together

Four Avon Products International (Avon) employees (including the President and Chief Financial Officer of the China operations) have been suspended after an internal investigation into improper payments (bribery) to Chinese officials. Avon has asked three executives in Asia and one employee in New York to take administrative leaves of absence pending the outcome of the Foreign Corrupt Practices Act (FCPA) investigation.

The current investigation stems from a June 2008 voluntary internal investigation into Avon's China operations over an allegation of improper expenses for items like travel and entertainment. The alleged improper payments under investigation include purchases of trips to France, New York, Canada and Hawaii for Chinese government officials with ties to Avon's business

Since the start of the June 2008 internal investigation, questions have arisen relating to payments in other jurisdictions (other than China). Avon has not said how many countries are covered by their internal investigation. The Wall Street Journal reported that the probe now involves a dozen or more countries.

Avon is the world’s largest door-to-door cosmetics seller. The products include cosmetics and various beauty lotions, creams and potions. These are not the kind of consumer products that one would normally think about when pondering bribery of foreign public officials. This is was makes the story so important --- bribery can be a problem for any type of business.

A small number of company officials burdened by sales targets and business stress may cross the line and damage the reputation of a well-known and respected organization. The recent economic crisis may have caused employees to take serious risks.

Enforcement of ant-corruption laws are on the rise. Recently, a number of Western companies, including Daimler (DAIGn.DE), Avery Dennison Corporation (AVY.N) and telecommunications company UTStarcom (UTSI.O), have become ensnared in China-related FCPA probes. In a separate case that turned a spotlight on corruption issues in China, a Shanghai court convicted four employees of mining firm Rio Tinto (RIO.AX) (RIO.L) of taking bribes and stealing commercial secrets, handing out sentences ranging between seven and 14 years in prison last month. More surprising news about bribery should be expected to be revealed in the future.

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